15 660 Strategic Human Resource Management MIT Sloan School of Management The Loyalty Effect Fred Reichheld Director Bain The Loyalty Effect HBS Press 1996 A consulting study of a trucking company showed that reducing driver turnover 50 could increase profits by 50 A study of brokerage companies showed that increasing broker retention by 10 increased broker value by 155 A study of retail stores showed that stores in the top third of employee retention were also in the top third in productivity with 22 higher sales per employee Fast food stores with low turnover had profit margins 50 higher than stores with high turnover Why Long Term Employees Create Value 1 Training Wages paid during the training period yield little or no return For long term employees training becomes a net benefit 2 Efficiency Long term employees are more efficient require less supervision and may be more motivated 3 Customers Loyal employees are better at identifying serving and retaining the best customers They are often a major source customer referrals 4 Employee Referral Long term employees often generate the best flow of high caliber job applicants
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